Improvement in valuations set to continue

The reversal in equity dividend yields following the virus-related market rout in March lead to a broad-based improvement in property valuations. (See Chart 1.) Coupled with central banks’ assurances that policy will remain accommodative for some time to come, the backdrop is supportive for property valuations. That said, the improvement in relative valuations is unlikely to offer much benefit in the short-term as we expect property yields to nudge up in the face of poor rental prospects and investor risk aversion.